Leonard v. Whaley , 98 N.Y. Sup. Ct. 304 ( 1895 )

PRATT, J.

This is an appeal from a judgment entered upon a trial before the court without a jury. The facts appear to be as follows: Whaley & Taylor, the appellants, had a contract with the United States government for the erection of two buildings at Willets Point, and the respondents, Leonard, Scofield, and Hammond, had each furnished them materials or performed labor for them in and about the erection. Whaley & Taylor became involved, and were unable to go on. They then owed Leonard $3,741.07, Scofield $656.75, and Hammond $2,500. These three creditors then entered into the agreement in question with the appellants, Whaley & Taylor, whereby they agreed to finish up the buildings, and the appellants assigned to them, not the payments coming from the government under this contract, but the proceeds of such payments when received,—i. e. the money or checks which might be paid to them by the government; and they further made these executory promises: “That they would not receive payments except in the presence of the respondents, or some of them; that they would attend in person, upon notice to do so, at the quartermaster’s office at Willets Point, and receive payments or drafts, and would immediately indorse and deliver the same over to the respondents.” They further agreed that such promises might be specifically enforced in equity or by injunction or other appropriate process. The respondents were to apply the moneys received by them to their reimbursement for the expense of completion. The value of their services was also to be retained, and the remainder applied pro rata to-the old debts above mentioned, and any residue over to the appellants. The respondents completed the buildings. All payments except the final one were collected by the appellants, and paid over to the respondents, and applied by them towards the expenses of completion, except some portion thereof, which they, as matter of grace, paid to the appellants, and a considerable sum, as yet unascertained, is still due the respondents, besides the old debts, which are wholly unpaid. The final payment of $18,350 was due from the government, and the money was in the hands of the quartermaster at Willets Point on November 10, 1893, ready to be paid. All parties attended on that day at the office of the quartermaster, who was about to draw and deliver checks for the amount due, when the appellants declared that they would not indorse and deliver them to respondents, as agreed.

The court below gave no effect to the agreement as an assignment, but directed a specific performance of the contract. This was in accordance with the contract, as there was contained in it an executory promise to immediately indorse and deliver all checks which might be received, and the contract was one that in equity might be specifically enforced. This could be done for the protection of the plaintiffs, without giving any effect to the agreement as an assignment of the claim.

The appellants claim that the court below had no jurisdiction of the subject-matter of the action, and that the contract of assignment was void, as coming within the prohibition of section 3477, Rev. St. U. S.¹ We do not think the matter to be fully within the purview of this statute. The intent of the purview was for the convenience and protection of the government, and not as a shield for those who would break their contracts and defraud their creditors.' It applies only to claims that can be presently made and disputed (Hobbs v. McLean, 117 U. S. 569-575, 6 Sup. Ct. 870), and will be given effect only so far as it may be invoked by the government to prevent a prejudice to the rights of the government (Bailey v. U. S., 109 U. S. 432, 3 Sup. Ct. 272; Trust Co. v. Shepherd, 127 U. S. 494, 505, 506, 8 Sup. Ct. 1250; Goodman v. Niblack, 102 U. S. 556). In the latter case, the court, in rendering the opinion, said the sections were passed “in order that the government might not be harassed by multiplying the number of persons with whom it had to deal, and might always know with whom it was dealing, until the contract was completed and settlements made. Their purpose was not to dictate to the contractor what he should do with the money received on his contract after it had been performed.” This case seems to render nugatory the authority of Spofford v. Kirlt, 97 U. S. 484, as favoring the contention of the appellants.

This judgment in no manner interferes with any government officer, but only orders the defendants to turn over to plaintiffs, as they had agreed, the final payment when paid to them.

Perhaps it was not necessary to appoint a receiver of the fund, but we see no just cause of criticism in that, as it protects the rights of all parties, and is really a favor to appellants.

The judgment is just, and in the interests of good morals, as preventive of an outrageous fraud.

Judgment affirmed, with costs. All concur.

1 Rev. St. U. S. § 3477: “All transfers and assignments made of any claim upon the United States, or of any part or share thereof, or interest therein, whether absolute or conditional, and whatever may be the consideration therefor, and all powers of attorney, orders, or other authorities for receiving payment of any such claim, or of any part or share thereof, shall be absolutely null and void, unless they are freely made and executed in the presence of at least two attesting witnesses, after the allowance of such a claim, the ascertainment of the amount due, and the issuing of a warrant therefor.”